Skip to main content

Even if a listing calls for no pre-emptive offers, if a bully bid is submitted the agent is obligated to inform the seller, who will decide if they look at it.Daniel Acker/Bloomberg

A house on Bain Avenue sold recently for an eye-popping amount above the asking price.

But that's not what had Toronto real estate agents talking.

The agents were surprised by a phrase that showed up in the listing information available to potential buyers.

"The seller reserves the right to consider pre-emptive offers."

It's a recent development that agents say increases the stress for buyers and undermines their bargaining power. But Bosley Real Estate Ltd., which is adding the phrase to its listings, says it protects the seller while cautioning the buyer not to sit back and wait.

In the Bain Avenue case, the agent was holding back offers until a set date and time. But he was also signalling that the sellers may be willing to look at an offer before that deadline. More commonly known as "bully offers," pre-emptive bids are usually initiated by a buyer who doesn't want to play by the rules and enter a bidding war.

Alan Dudeck, a real estate agent with Sutton Group – Associates Realty Inc., had clients who were interested in the house and were planning on tabling a bid on offer night.

But once they saw that phrase, they felt obliged to move right away or risk losing out to another bully.

"My client said, 'we have to prepare an offer.'"

Mr. Dudeck followed his client's direction and prepared an offer for $110,000 above asking for the listing agent, Christopher Kelly of Bosley Real Estate Ltd. Mr. Dudeck said the seller decided not to look at it.

Just because they "reserve the right" to look at a bully offer, doesn't mean they shall, points out Mr. Dudeck.

After that, the listing appeared to be reworded to say the seller "will not look at any pre-emptive offer."

But Mr. Dudeck's clients – who decided not to return on offer night – felt very manipulated. Mr. Dudeck felt bad that they had felt pressed.

"I'm out in the field – a busy agent – the last thing we need to do is incite buyers to move ever faster than they already do."

As it turns out, the seller did very well by waiting for the offer night: the house, listed with an asking price of $849,000, sold for $1.1080-milllion, he says.

And Mr. Dudeck's clients fared well because they ended up with a house that cost them less than they offered for the house on Bain.

But why add the phrase that the seller reserves the right to look at pre-emptive offers and then not do it?

Ann Bosley, vice-president and general manager for Bosley Real Estate, says the firm added the phrase to listings after the Real Estate Council of Ontario (RECO) strengthened its guidance on the rules surrounding bully offers.

Sometimes sellers vow they won't look at a bully offer but they become tempted if one arrives. Listing agents are always obliged to notify the seller.

"From our perspective, we can't control our sellers' minds."

She says it also informs the potential buyers that the schedule could change.

"Don't relax and sit back on your haunches and think you have five days because you may not."

She believes the policy is working fine, adding that it's necessary because pre-emptive offers have become increasingly common with listings so thin in Toronto.

"It's a product of a market that doesn't have enough inventory."

Listing agents who receive a bully offer are obliged to notify everyone who has expressed interest in the house so that they can come to the table too. That typically means that the listing agent will contact everyone who booked a showing or left their card or contact information at an open house.

RECO's deputy registrar of regulatory compliance, Bruce Matthews, says the organization has clarified expectations for listing agents. Under the code of ethics, a listing agent has an over-arching responsibility to contact all the interested parties at the earliest practical opportunity when a bully offer arrives.

"As soon as it's in your hands," Mr. Matthews says of the timing.

He says the organization has received some complaints from consumers about bully offers.

Listing agents who establish a deadline for offers put the obligation on themselves to follow that practice, he says, adding that information about the offer date is on the multiple listing service, it needs to be changed.

He considers it an unusual practice, however, to add a phrase to the listing that states pre-emptive offers will be considered.

Christopher Bibby, a real estate agent with Sutton Group – Associates Realty Inc., also encountered a listing that stated the seller had the right to look at pre-emptive offers.

His clients also felt the need to jump in with a bully offer. In that case the seller looked at the offer – for full asking price and meeting all of the seller's conditions – and rejected it.

"I don't think it's fair to prospective buyers," he says.

Mr. Bibby says by making the pre-emptive offer, he has already shown his cards before the offer night. His clients decided not to go back to the table.

By setting an offer date while also signalling that bullies can step forward, the listing agent is, in effect, saying "offers any time," Mr. Bibby argues.

"It's just sending a mixed signal to the consumers if you're willing to entertain a bully offer," he says. From the buyer's agent point of view, "You've basically shown them what you'd be willing to pay before the offer date and you've set a precedent."

He says listing agents will also sometimes change the offer date, or change the rules for presenting offers. He argues that the schedule of events should be set out with full transparency.

"You never know what's actually happening behind the scenes," he says.

One of RECO's main concerns is to protect and educate consumers, Mr. Matthews says.

"If you're going to change the rules of the game, you've got to let everyone know that the change has taken place."

As for whether a seller chooses to look at a bully offer, that is completely their choice. Mr. Matthews says listing agents should have written instructions from sellers.

"We don't regulate the conduct of sellers. Sellers can put into those written instructions any directive that they want."

Mr. Dudeck says he believes any tactic that puts even more pressure on buyers is ill-advised.

"There's enough heat and energy – we really don't need more fuel for that fire."

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe